HINDU UNDIVIDED FAMILY (HUF) - PowerPoint PPT Presentation

HINDU UNDIVIDED FAMILY (HUF). By Nikhil Agarwal (M.COM, CS, ACMA, ACA) &amp; Sudhir Saklani (B.COM, CS, LLM). WHAT IS HUF?. It is obvious that a non-Hindu family cannot get this status. So, A Parsi, Muslim or Christian cannot create a HUF.

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It is obvious that a non-Hindu family cannot get this status. So, A Parsi, Muslim or Christian cannot create a HUF.

So, what is a HUF?

The term 'Hindu Undivided Family' has not been defined under the Income Tax Act. It is defined under the Hindu Law as a family that consists of all persons lineally descended from a common ancestor, including wives and unmarried daughters.

This means that a membership into a HUF does not come from a contract but from status under hindu law.

A HUF cannot be formed by a group of people who do not constitute a family; lineal descendents with a common ancestor is a must.

Even though Jain and Sikh families are not governed by the Hindu law, they can still be treated as a HUF.

The most frequently asked question about HUF is: How does it come into being? To form an HUF, One has to do is Get Married. The HUF gets created as soon as a person complete the seven (or four,whatever) circles round the holy fire and become husband and Wife.

There have to be a minimum of two people to constitute a family. The husband and wife together make up a family. They don't have to wait till they have a baby to constitute their HUF

No, an unmarried cannot form a HUF of which he seeks to be the Karta himself. He can very well be the member of the HUF of his father or grandfather, but to create his own HUF he has to wait till he gets married.

KartaThe karta has to be the oldest male in the family. If he passes away, his wife cannot become the karta. His eldest son will take his place. If he chooses not to, he can give up his right and the next son in line can take his place.

CoparcenersThis is what all the male members are referred to as.

A Hindu coparcenary includes the sons, grandsons and great-grandsons of the holder of the joint family property. By virtue of their birth, they acquire an interest in the property.

Yes, there can be. Where a couple has only a daughter—-and the husband passes away,the mother-daughter duo can continue the HUF (although a problem may arise after she gets married and becomes a member of her husband's HUF). It has been held by the Allahabad High Court in CIT v. Sarwan Kumar 13 ITR 361 (All) that there can be an HUF consisting of female members.

Can a female be the Karta? The answer can't be No in the light of the amendment in the Hindu succession Act in 2005.An unmarried daughter, in the unfortunate event of her father passing away, will become the Karta of the HUF if she has no brother.

A member of the HUF throwing his money into the common pool, or to use that overused cliché' the family hotchpot, is out of the question, thanks to Section 64(2) which would tax the income earned by the HUF on that money in the individual member's hands only but now this has been amended by finance bill 2012 and now clubbing will not apply to these type of transfer.

A father may make a gift of money to his son's newly-created HUF, clearly specifying in the Gift Deed that the gift is to his son's smaller HUF and not to the son himself. This will keep both Section 64(2)and Section 56(2) at bay.

After the HUF has a nucleus of its own and gets going, care has to be taken to keep the HUF's affairs completely distinct from the individual members' affairs.

Some other people, who aren't members ofthe HUF but are relatives in terms of Section 56(2) can also be found out.

This is actually a division of property where the share of each member is determined.

Any coparcener can enforce the partition of the HUF and then the share will be divided between:

~ All coparceners~ A son in the womb of his mother at the time of partition~ Mother (gets an equal share if there is a partition between the sons and her husband has passed away)~ Wife (gets a share equal to that of a son at the time of partition between father and sons)

Income tax act does not recognize partial partition. So there should be complete partition of HUF.